Inside the Mind of the Millennial Investor

The traditional path for cultivating a financial nest egg is quickly becoming a thing of the past — for millennial investors, that is.

“The Boomers grew up learning that if you put money into the equity market and let it stay there for a long period of time, you could get your 8-9 percent compounded,” explained Keith Banks, the president of U.S. Trust, during a session at this year’s Aspen Ideas Festival. “When you retired, that was your nest egg, along with the equity you’d built up in your home.”

But according to Banks, millennials approach investing in a vastly different fashion.

“[Millennials] saw two very dramatic pullbacks in the equity markets,” explained Banks, referring to the tech bubble burst in 2000 and the financial crisis in 2008 and 2009. “They don’t have that belief that if you trust in equities, it’ll be okay and as a result you don’t have your traditional asset allocation.”

There certainly is no shortage of debate about these types of generational dynamics.U.S. Trust Insights on Wealth and Worth®, a recent study of 680 high-net worth and ultra-high-net worth adults, found that individuals under the age of 35 who had $3 million or more in investable assets (13 percent of the participants) had clearly identifiable investing characteristics. “Millennials like real estate, having their assets in their own business, they like art, things they can see, feel, touch, and observe in that manner,” explained Banks. “They tend to have a much higher percentage of their wealth in alternative investments.”

“They trust their ability to be optimistic. They tend to be entrepreneurial. You see a very different approach to investing,” Banks noted.

Another approach that sets millennials apart is their dedication to devoting significant assets into socially responsible ventures.

“The other thing that’s important is that the millennials have a real passion for making a difference,” Banks remarked. “When they exit stage right, they want to be able to look back and feel that their presence here made a difference in some profound way. That’s where they put their money.” According to U.S. Trust’s research, 75 percent of millennial investors said that they are very focused on the social and environmental impact of the companies that they consider investing in.

Generally speaking, all of this is good news for the American economy. But Banks, who outlined his general optimism about the current economic state of the country during the session, noted that firms like U.S. Trust still have some work to do to encourage millennials to invest in the types of equities their parents did. “We’re working on it,” he observed with a smile.

They certainly have plenty of people to work with. According to Banks, advances in sectors like technology have led to a larger number of young Americans holding significant wealth. But there is also a large group of young people who are benefitting from inherited wealth — something that Banks noted was not the case with the baby boomer generation.

“Our typical client at U.S. Trust has first-generation wealth. A typical baby boomer today with wealth, created that wealth,” explained Banks. “They built that business, they had that idea, it was their blood, sweat and tears. Many people believe that the millennials are able to look at things through a social lens because they have the luxury to do so.”

But don’t confuse that luxury with generational guilt. In fact, the millennial generation does have one important thing in common with their investor forebears: upholding the grand tradition of American generosity.

“The clients that we serve at U.S. Trust, they are incredibly philanthropic. Whether you are 80 or 70 or 30, our clients believe that, if you hold wealth, you have a duty to give back. It’s incredible the generosity we see with our clients and the impact they have.”

“That’s something that’s shared across the board,” said Banks.

That’s great news for all of us, no matter how old you are.

SPONSOR CONTENT

Content contained herein may have been produced by an outside party that is not affiliated with U.S. Trust or Bank of America. Opinions or ideas expressed are not necessarily those of Bank of America or U.S. Trust nor do they reflect their views or endorsement. These materials are for informational purposes only. Bank of America nor U.S. Trust assume liability for any loss or damage resulting from anyone's reliance on the information provided.